2017/18 results

TUI improves profits in Central Europe

TUI improved profits in its core Central Europe region despite flat revenues in Germany this year while growth in the hotels and cruise businesses drove overall group profits to a new high.

December 19, 2018
TUI CEO Fritz Joussen presented higher profits and promised similar growth in 2019.
Photo: TUI AG / Christian Wyrwa

Europe’s largest tourism group reported mixed performances in its big source markets this year while the high-margin cruise and hotel businesses continued to be the main profit-drivers, the 2017/18 results presented last week show.

TUI Group improved underlying EBITA to €1,147 million, up by €45 million (+10.9%) on last year’s figure of €1,102 million, and turnover increased by 6.3% to just over €19.5 billion. Profits from the Hotels & Resorts business rose by 19.4% to €426 million, including €390 million from Spanish hotel group Riu, while cruise profits soared by 27% to €324 million, including €181 million from TUI Cruises.

The Markets & Airlines segment, covering tour operator and airline activities in all source markets, increased full-year turnover by 5.3% to nearly €17 billion as customer numbers rose by 4.7% to 21.1 million. But its profits fell by 14% to €452 million due to tough trading conditions, especially for tour operators, and one-off events affecting aviation.

“The weakness of pound sterling resulting from the Brexit vote, prolonged air traffic disruption caused by French air traffic controller strikes and a prolonged heatwave in Northern and Central Europe impacted the entire sector and were also reflected in the operating result delivered by Markets & Airlines, which fell short of the previous year’s levels,” TUI commented.

The Central Region, covering Germany, Austria, Switzerland and Poland, increased turnover by 8.7% to nearly €6,564 million as customer numbers went up by 7.8% to 7.7 million in the year ending September 2018.

The Hanover-based group noted that customer numbers in Germany and Austria grew by 2.9% this year, driven by strong demand for Turkey, North Africa and Greece, although demand weakened over the summer due to the long heatwave. However, revenues in Germany (shown as “external turnover by customer location”) dropped by a fractional 0.4% (€20.5 million) to €5,493 million, the annual report showed.

The Central Region’s underlying EBITA improved by a strong 24.6% to €89.1 million, mostly thanks to the non-repetition of the previous year’s one-off costs at TUIfly as well as higher earnings in Switzerland and Poland. This was an EBITA margin of 1.4%.

In comparison, the Northern Region, covering the UK, the Nordics and joint ventures in Canada and Russia, generated a low 3.8% rise in turnover to €6,855 million. Underlying EBITA dropped by 26.5% to €254 million, although this is still nearly three times higher than the Central Region and represents a profit margin of 3.7%. UK revenues and customer numbers (+2.3%) both grew but margins dropped as the weaker pound outweighed higher selling prices and due to the summer heatwave and aviation disruption. The Nordics improved revenues, customer volumes (+2.6%) and also profits.

The smaller Western Region, covering France, Belgium and the Netherlands, increased turnover by 2.2% to €3.578 million and had flat profits of €109 million, with the Benelux countries compensating for a “disappointing” performance in France. However, the profit margin remained at 3.1%, putting it behind the Northern Region but ahead of the Central Region.

TUI CEO Fritz Joussen said at a results presentation in London: “We are investing, we are growing with TUI’s high-margin products and services and our businesses are increasingly scaling. Today, our own Holiday Experiences content account for more than 70% of our earnings: hotels, cruises, excursions and destination activities. This enables us to clearly differentiate ourselves from the competition. With more than 20 million customers, use of state-of-the-art IT and intelligent customer systems, we have considerable potential for new business, turnover and earnings. We will continue our successful transformation: The next step will transform TUI into a digital and platform organisation.”

For financial year 2019, the TUI Executive Board expects to deliver growth in underlying earnings of at least 10% in a challenging market environment. Winter bookings are currently 1% lower than last year and the average selling price is down by 2%, but the group said it aims to mitigate the impact of a challenging environment in the traditional tour operator business through further growth in its hotel and cruise companies, digitalisation and efficiency initiatives as well as the expansion of its Destination Experiences segment.

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